Disang sells satellite phones for $1,000 each with a one-year warranty against defects. Past experience indicates that 5 percent of the units will prove defective and that the average repair cost for each is $100. This past year, 50,000 phones were sold, and 500 of these have already been returned for service.

Multiple Choice

• None of these

• The estimated liability for warranties at year end is $500,000

• The estimated liability for warranties at year end is $250,000

• The estimated liability for warranties at year end is $50,000

• The estimated liability for warranties at year end is $200,000